News & Blog

Read the latest business news, blogs and thought leadership articles from our members, as well as updates on the Edinburgh Chamber of Commerce's work in the city.

News & Blog

SAVING TURNING TO SPENDING TO BOOST SCOTTISH RETAIL

Posted: 24th June 2021

Glasgow, 24 June, 2021 – With the Scottish economy beginning to re-open and people starting to spend savings built up during lockdowns, there are signs – that will be welcomed by retailers – of consumer confidence returning.

 

In its latest annual Midsummer Retail Report, Colliers reveals that thanks to the ‘vaccine bounce’, and hope that the end of the pandemic is in sight, retail footfall is beginning to increase.

 

This move is starting to unlock the record UK household savings made last year, when more than £200 billion was put away for a rainy day, well above the long-term average. The UK savings ratio, which normally stands around 8%, reached an all-time high of over 25% in the second quarter of last year.

 

Ross Wilkie, director of Retail with Colliers in Scotland, said: “The pandemic will continue to shape the retail and leisure landscape in Scotland for generations to come. It is, of course, positive for retailers to see the economy opening up and footfall increasing.

 

“There will inevitably be further business failures once the rent moratorium and furlough are lifted. But there is still demand for the right opportunities on the high street for operators who see a future in ‘bricks and mortar’ retail.”

 

Consumers switch from ‘cards-to-cash’

 

Colliers’ Chief Economist, Dr Walter Boettcher, commented: “Interestingly, the year-on year surge in the volume of retail sales that we have seen since the Spring and the correlated savings ratio would seem to suggest that households are not only spending more, they are also paying down debt.

 

“This switch from ‘cards to cash’ would indicate that household bank balances are continuing to grow, albeit at a slower pace, but growing nonetheless.”

 

This sustained level of saving – which is still running at nearly twice the long-term average – may also mean that when the Government’s emergency economic supports ceases, this cash pile can also help support the transition back to normality.  The housing market may also benefit as a consequence.

 

Retail undergoing ‘brutal’ transition

 

The Midsummer Retail Report looks at trends across retailing and their impact on the property market which supports the UK shopping scene. While a growing number of retailers are taking advantage of rents – which have fallen by as much as 50% since their peak in the noughties – to access new and better trading positions, the report also details the ‘brutal’ transition that is taking place.

 

Colliers’ Head of UK Retail, David Fox, observed: “Notwithstanding the best efforts of the Government, the surgery that UK retail continues to undergo is brutal and that has been vividly illustrated throughout the property market which it supports.

 

“There’s consensus that UK retail property void levels are around 15% but if you also take into account the stores that are let on flexible agreements, post-CVA terms etc then the real void rate must be double that.

 

“So, we would estimate that around one in three shops in the UK are either vacant, not income-producing or occupied on very short-term arrangements.”

 

Resilient out-of-town market

 

Ross Wilkie commented: “The out-of-town market has remained more resilient throughout the pandemic with demand driven by food operators, discounters and gym operators.

 

“Active operators have included Home Bargains, Lidl, Aldi, Food Warehouse, M&S Simply Food, B&M, Pure Gym and The Gym. The most notable transaction, though, was Decathlon’s debut in Aberdeen in the retail park terrace at Union Square.

 

“The drive-thru market, following successful trade throughout the pandemic, continues to thrive with competition for sites fierce amongst the likes of McDonalds, Costa, Starbucks, Taco Bell, KFC and Tim Hortons. New entrants to this market are emerging from brands entering the UK, such as Popeyes Chicken and Wendy’s.”

 

Scotland’s two biggest cities

 

Colliers has looked at the latest developments in Edinburgh and Glasgow. In the Scottish capital the highly-anticipated opening this week of the £1 billion St James Quarter is at the top of the retail agenda.

 

St James Quarter, at the east end of the city centre, has 85 shops, 30 restaurants, two hotels and a cinema. It provides Scottish debuts to brands such as Joe Browns, Bershka, Stradivarius, Pull & Bear, Rituals and Miele. They will join established names, including John Lewis, Next, Boots and Zara.

 

Ross Wilkie said: “The St James Quarter will shift Edinburgh’s retailing centre of gravity, with the western end of Princes Street needing to re-invent itself from its traditional retail use to alternative uses, such as the Johnnie Walker Experience Centre, due to open in the former House of Fraser.”

 

Looking west to Glasgow, Colliers says much of the leasing activity has been centred around Blackstone’s St Enoch Centre which will welcome a raft of new lettings to create a mixed-use destination at the southern end of the city centre. The nine-screen Vue cinema has recently opened with an array of other leisure and retail getting ready to open.

 

Ross Wilkie added: “On Glasgow’s most established retail pitch, Buchanan Street, we continue to see an unprecedented number of units available, which will undoubtedly result in a rebasing of rental values. Activity has been subdued, but there have a been a number of deals including Sky, Peloton and Breitling.”

 

Government must structure support

 

Colliers is calling on the Government, north and south of the border, to do more to reconcile the interests of landlords and occupiers.

 

David Fox commented: “The extension of the commercial eviction moratorium means there will have been a two-year pause on landlords’ ability to collect rent from their tenants. By any measure, that’s an extraordinary length of time for businesses to be rendered unable to function effectively.

 

“Of course, lockdown has been an equal challenge to tenants and the pandemic has demonstrated, in the loss of jobs and livelihoods, just how very important the retail and leisure sector is to the economy and wider society.

 

“While free market economics must be allowed to be the driving force of changes in the industry, thoughtful legislation and regulation will allow breathing space so businesses can assess options, adjust business models and seek investment for stabilisation – and even opportunities for growth in a rebooted market.”

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.
Read more here